Friday, June 01, 2007

Food first?

Biofuel crops have replaced food as the most profitable crop in several European countries. This comes on the heels of reports that many U.S. farmers are preparing to plant "wall-to-wall corn" to produce fuel. For reasons articulated in previous posts, I think these actions are shortsighted and a real cause for concern.

For many people forced to live on low or fixed incomes, the challenge of balancing food and energy budgets is a constant struggle. Dedicating more and more land to grow crops for fuel have already driven up the cost of corn and threatens to do the same for other staples. There is a real danger in taking our sources of food for granted. (GW)Europe Pushes to Get Fuel From Fields

ARDEA, Italy — The previous growing season, this lush coastal field near Rome was filled with rows of delicate durum wheat, used to make high-quality pasta. Today it overflows with rapeseed, a tall, gnarled weedlike plant bursting with coarse yellow flowers that has become a new manna for European farmers: rapeseed can be turned into biofuel.

Motivated by generous subsidies to develop alternative energy sources — and a measure of concern about the future of the planet — Europe’s farmers are beginning to grow crops that can be turned into fuels meant to produce fewer emissions than gas or oil. They are chasing their counterparts in the Americas who have been raising crops for biofuel for more than five years.

“This is a much-needed boost to our economy, our farms,” said Marcello Pini, 50, a farmer, standing in front of the rapeseed he planted for the first time. “Of course, we hope it helps the environment, too.”

In March, the European Commission, disappointed by the slow growth of the biofuels industry, approved a directive that included a “binding target” requiring member countries to use 10 percent biofuel for transport by 2020 — the most ambitious and specific goal in the world.

Most European countries are far from achieving the target, and are introducing incentives and subsidies to bolster production.

As a result, bioenergy crops have replaced food as the most profitable crop in several European countries. In this part of Italy, for example, the government guarantees the purchase of biofuel crops at 22 euros for 100 kilograms, or $13.42 for 100 pounds — nearly twice the 11 to 12 euros for 100 kilograms of wheat on the open market in 2006. Better still, farmers can plant biofuel crops on “set aside” fields, land that Europe’s agriculture policy would otherwise require be left fallow.

But an expert panel convened by the United Nations Food and Agriculture Organization pointed out that the biofuels boom produces benefits as well as trade-offs and risks — including higher and wildly fluctuating food prices. In some markets, grain prices have nearly doubled.

“At a time when agricultural prices are low, in comes biofuel and improves the lot of farmers and injects life into rural areas,” said Gustavo Best, an expert at the Food and Agriculture Organization in Rome. “But as the scale grows and the demand for biofuel crops seems to be infinite, we’re seeing some negative effects and we need to hold up a yellow light.”

Josette Sheeran, the new head of the United Nations World Food program, which fed nearly 90 million people in 2006, said that biofuels created new problems. “An increase in grain prices impacts us because we are a major procurer of grain for food,” she said. “So biofuels are both a challenge and an opportunity.”

In Europe, the rapid conversion of fields that once grew wheat or barley to biofuel crops like rapeseed is already leading to shortages of the ingredients for making pasta and brewing beer, suppliers say. That could translate into higher prices in supermarkets.

“New and increasing demand for bioenergy production has put high pressure on the whole world grain market,” said Claudia Conti, a spokesman for Barilla, one of the largest Italian pasta makers. “Not only German beer producers, but Mexican tortilla makers have see the cost of their main raw material growing quickly to historical highs.”

Some experts are more worried about the potential impact to low-income consumers. In the developing world, the shift to more lucrative biofuel crops destined for richer countries could create serious hunger and damage the environment if wild land is converted to biofuel cultivation, the agriculture panel concluded.

But officials at the European Commission say they are pursuing a measured course that will prevent some of the price and supply problems seen in American markets.

In a recent speech, Mariann Fischer Boel, the European agriculture and rural development commissioner, said that the 10 percent target was “not a shot in the dark,” but was carefully chosen to encourage a level of growth for the biofuel industry that would not produce undue hardship for Europe’s poor.

She calculated that this approach would push up would raw material prices for cereal by 3 percent to 6 percent by 2020, while prices for oilseed might rise 5 percent to 18 percent. But food prices on the shelves would barely change, she said.

Yet even as the European program begins to harvest biofuels in greater volume, homegrown production is still far short of what is needed to reach the 10 percent goal: Europe’s farmers produced an estimated 2.9 billion liters, or 768 million gallons, of biofuel in 2004, far shy of the 3.4 billion gallons generated in the United States in the period. In 2005, biofuel accounted for around 1 percent of Europe’s fuel, according to European statistics, with almost all of that in Germany and Sweden. The biofuel share in Italy was 0.51 percent, and in Britain, 0.18 percent.

That could pose a threat to European markets as foreign producers like Brazil or developing countries like Indonesia and Malaysia try to ship their biofuels to markets where demand, subsidies and tax breaks are the greatest.

Ms. Fischer Boel recently acknowledged that Europe would have to import at least a third of what it would need to reach its 10 percent biofuels target. Politicians fear that could hamper development of a local industry, while perversely generating tons of new emissions as “green” fuel is shipped thousands of kilometers across the Atlantic, instead of coming from the farm next door.

Such imports could make biofuel far less green in other ways as well — for example if Southeast Asian rainforest is destroyed for cropland.

Brazil, a country with a perfect climate for sugar cane and vast amounts of land, started with subsidies years ago to encourage the farming of sugarcane for biofuels, partly to take up “excess capacity” in its flagging agricultural sector.

The auto industry jumped in, too. In 2003, Brazilian automakers started producing flex-fuel cars that could run on biofuels, including locally produced ethanol. Today, 70 percent of new cars in the country are flex-fuel models, and Brazil is one of the largest growers of cane for ethanol.

Analysts are unsure if the Brazilian achievement can be replicated in Europe — or anywhere else. Sugar takes far less energy to convert to biofuel than almost any product.

Yet after a series of alarming reports on climate change, the political urgency to move faster is clearly growing.

With an armload of incentives, the Italian government hopes that 70,000 hectares, or 173,000 acres, of land will be planted with biofuel crops in 2007, and 240,000 hectares in 2010, up from zero in 2006.

Mr. Pini, the farmer, has converted about 25 percent of his land, or 18 hectares, including his “set aside” land, to Europe’s fastest-growing biofuel crop, rapeseed. He still has 50 hectares in grain and 7 in olives.

He has discovered other advantages as well. In Italy’s finicky food culture, food crops have to look good and be high quality to sell— a drought or undue heat can mean an off year. Crops for fuel, in contrast, can be ugly or stunted.